Will Worcester become a grocery shopping mecca?

Sunday

Aug 17, 2014 at 6:00 AM

By Peter S. Cohan WALL & MAIN

Market Basket has been known as a store with lower prices than the competition. But that Market Basket of recent lore is not operating now and may never reopen. That means shoppers who like to save money will have to look elsewhere. The good news is that three stores with prices lower than Market Basket's call Worcester home.

Will former Market Basket customers drive to Worcester for their groceries?

Before getting into this question, as of this writing last week, my best guess is that Market Basket as people fondly remember it will never reopen. The 71-store, $4.6 billion (2013 revenue) grocery chain offered lower prices and paid employees more than rivals — and for decades that was a recipe for loyal customers and happy workers.

Sadly, that happy picture masked a battle for control between two branches of the Demoulas family. Arthur T. Demoulas was the operator, who now controls 49.5 percent of Market Basket, while cousin Arthur S. Demoulas represents the 50.5 percent share that wants a higher return on its investment.

After firing Arthur T., Arthur S.'s side installed co-CEOs who have been urging Market Basket's striking employees to go back to work. After all, in the last month, the stories have been nearly empty of groceries, customers, employees and cash. And that means that unless those co-CEOs soon replace the striking workers with a fresh batch of loyal employees, Market Basket will train its customers to shop elsewhere and its value will be permanently impaired.

Here is why I believe that Market Basket will never return to its former glory. Arthur S.'s side of the family will not rehire Arthur T. as CEO because of the decades of bad blood between them. There is also greed: They will not rehire Arthur T. as CEO because they believe he sets prices too low and pays employees too much.

Based on the dawdling of the board of directors, which is costing all shareholders of the now-money-losing stores, I am guessing that Market Basket desperately wants to sell itself to anyone but Arthur T. I expect that Market Basket will go to another entity, like Hannaford, which will raise prices to customers and cut employee pay.

This means that those former Market Basket stores might reopen with the same signs, but they will not operate with the same strategy. This will leave all Market Basket customers in the lurch.

But fear not: An Aug. 12 study by Consumer World, a Boston-based, public service consumer resource guide founded by Edgar Dworsky, former assistant attorney general in the Consumer Protection and Antitrust Division of the Massachusetts attorney general's office, reports that "some little known grocery chains are actually less expensive than Market Basket — up to 17 percent less for a basket of common items."

Three of those stores are located in Worcester. PriceRite runs two of them, one at 117 Gold Star Blvd., and the other at 542 Southbridge St. Aldi runs the other one, at 500 Lincoln St.

These stores are called "limited assortment supermarkets" because they primarily stock their own store brand of goods and usually carry one size of each. The stores are small in comparison to full-size supermarkets because of their lack of variety and brand-name choices. Their meat and produce departments are smaller, too, carrying only popular items that may or may not be priced aggressively.

One Aldi manager estimates that sales at his store are up by 65 to 70 percent since Market Basket workers began their protests, according to Consumer World.

Consumer World's survey was not the most systematic, but it seems to be enough to get shoppers' attention. On Aug. 6, Consumer World did price checks at "nearly two dozen common store brand grocery items" at Market Basket, Stop & Shop and Save-A-Lot, all in Chelsea; Star Market in Somerville; Aldi in Medford; and Price Rite in Revere. "Sixteen of those items were stocked by each of the six grocery chains."

According to Consumer World, "The chain with the lowest prices was Aldi, where the basket of items checked was 17 percent less than Market Basket. What cost a total of only $24.26 at Aldi was over $38 at Star Market — 57 percent more. In all, Aldi had the lowest prices on all but two of the common items."

The Consumer World study included examples of the prices at the stores. Aldi won on peanut butter, saltines and vegetable oil. According to Consumer World, "A 40-ounce jar of store brand peanut butter was a low $2.99 at Aldi, $3.99 at Market Basket, $4.49 at Stop & Shop, and a whopping $4.99 at Star Market despite being on sale there. A one-pound box of saltine crackers was a low 89 cents at Aldi, but double the price at Stop & Shop ($1.89) and triple the price at Star Market ($2.79). Market Basket was $1.50. And a 24-oz bottle of vegetable oil ranged from a low of $2.29 at Aldi to a high of $3.39 and $3.49 at Stop & Shop and Star Market, respectively."

As Aldi parking lots swell with shoppers, the Market Basket story offers a powerful lesson: A great reputation is difficult to build and sustain, yet it can perish in an instant.

Peter Cohan of Marlboro heads a management consulting and venture capital firm, and teaches business strategy and entrepreneurship at Babson College. His email address is peter@petercohan.com.